Smart Grid Technology (Archived Report)

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Archived Report
Smart Grid Technology

by James G. Barr

Docid: 00021992

Publication Date: 2003

Report Type: TUTORIAL


The US electric system, one of the supreme engineering achievements of the
20th century, is aging, inefficient, congested, vulnerable to attack (both
natural and manmade), and incapable of supporting  or managing 21st century
energy requirements. Along with building out their power generation
infrastructure to provide increased capacity, the US electric industry needs to
infuse the system with "smart grid" technology such as expanding the use of
microprocessors to record and report information that will enable electric
providers and consumers to regulate and conserve costly electric resources.

Report Contents:

Executive Summary

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US Energy Information Administration (EIA) predicts that worldwide electric
power generation will nearly double by 2030. Unfortunately, the power generation
infrastructure is aging, inefficient, congested, vulnerable to attack
(both natural and manmade), and incapable of supporting – much less managing – 21st century energy requirements.

Today’s grid is also huge. As analyst Nick Davis reminds us,
"The grid uses
power plants of all kinds (e.g., nuclear, hydro, wind turbine, solar, coal, and
natural gas), transformers, substations, and more than 200,000 miles
of high-voltage transmission lines – that’s nearly the distance to the moon – and 5.5 million miles
of local distribution lines."1

The US Department of Energy says that, "Although the electric grid is considered an engineering marvel, we are
stretching its patchwork nature to its capacity."

Along with building out their power generation
infrastructure to provide increased capacity, the US electric industry needs
to infuse the system with "smart grid" technology, expanding, for
example, the use of microprocessors to record and report information relative to
electric utilization – information that will enable electric providers (and
consumers) to regulate and conserve costly electric resources. 

The forces driving the demand for smart grid solutions are both simple and

  1. An ever-escalating population, more than seven billion worldwide.
  2. An understandable feeling of entitlement among
    peoples of developing nations who deserve – and demand – the same
    plugged-in lifestyle enjoyed by Americans and other "westerners".
  3. The gradual transition from an energy
    infrastructure based on oil and national gas to one based on solar, wind,
    and other renewable electric energy sources.
  4. The need to save money. The Electric Power Research
    Institute estimates that the implementation of smart grid technologies could
    reduce electricity use by more than four percent by 2030. That would mean a
    savings of $20.4 billion for businesses and consumers around the country.
  5. A phenomenon which Smart Grid News describes as "the electrification
    of everything," including the first serious efforts to develop a
    majority electric car fleet.2   

According to the GridWise
Alliance, smart grid solutions, in the form of special hardware, software, and
telecommunications tools, offer the promise of:  

  1. "[Reducing]
    peak demand by actively
    managing consumer demand
    – The percentage of available appliances
    and equipment that can respond to both consumer and utility operator
    priorities continues to grow. The ability to manage power requirements in
    both directions – to the utility as well as from the utility – will reduce
    the need for power, especially during high-use periods like hot summer
    afternoons when the cost of producing and delivering power is extremely

  2. "[Balancing] consumer reliability and power
    quality needs
    – Although some uses of electricity require near
    perfect reliability and quality, others are almost insensitive to these
    needs. A smart grid will be able to distinguish the difference and adjust
    power reliability and quality accordingly at an appropriate cost.

  3. "[Mining] energy efficiency opportunities
    – A smart grid will furnish consumers and utilities with
    accurate, timely, and detailed information about energy use. Armed with this
    information, [consumers and utilities] can identify ways to reduce energy consumption with no
    impact on [their] safety, comfort, and security.

  4. "[Improving] overall operational
    – A smart grid will become increasingly automated, and
    smart sensors and controls will be integral to its design and operation. Utility operators will be able to easily identify, diagnose, and correct
    problems, and will even have the capabilities to anticipate problems before
    they happen.

  5. "Seamlessly [integrating] all clean energy
    – Electric vehicles, roof-top solar systems, wind
    farms, and storage devices will become a fundamental part of the grid. These
    clean energy technologies will generate not only energy and power, but serve
    many other vital functions as well."3


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The term "smart grid" generally refers to a class of enabling technologies that
are employed to deliver 21st century electrical service utilizing
computer-based remote control and automation.

Table 1. Today’s Grid, and Tomorrow’s




active participation by consumers

are uninformed and non-participative with power system

involved, and active consumers – demand response and distributed energy

all generation and storage options

by central generation – many obstacles exist for distributed energy
resources interconnection

distributed energy resources with plug-and-play convenience focus on

new products, services, and markets

wholesale markets, not well integrated – limited opportunities for

well-integrated wholesale markets, growth of new electricity markets for

power quality for the digital economy

on outages – slow response to power quality issues

quality is a priority with a variety of quality/price options – rapid
resolution of issues

assets and operates efficiently

integration of operational data with asset management – business
process silos

expanded data acquisition of grid parameters – focus on prevention,
minimizing impact to consumers

and responds to system disturbances (self-heals)

to prevent further damage – focus is on protecting assets following

detects and responds to problems – focus on prevention, minimizing
impact to consumers

resiliently against attack and natural disaster

to malicious acts of terror and natural disasters

to attack and natural disasters with rapid restoration capabilities

Source:  US Department of Energy

Today’s electrical grid is built on a 1950s
analog model in which electricity is generated at a central power plant and then
pushed over miles – or hundreds of miles – of transmission lines to waiting
customers, either businesses or consumers. This traditional grid model is
one-way, and allows for no two-way, or interactive, communications between
producers and end-users, with the effect that both parties lack the information
and the means to properly regulate electric usage.

With electricity becoming a more dominant energy
source, this "dumb" grid model is no longer tolerable, and a new smart
grid model is emerging. The smart grid consists of three basic
components, as illustrated in Figure 1:

  1. Smart devices
  2. Two-way communications
  3. Advanced software4

Figure 1. Smart Grid Model

Figure 1. Smart Grid Model

Source: Smart Grid News

devices, such as meters, monitors, and intelligent electronic devices, gather
information about the flow and condition of power, and about the condition of

"The smart devices [then] transmit
the information over a two-way communications pathway.

software [then] processes the data and uses it to ‘ power’ applications. Some of those
applications help run the grid itself. Others handle billing, service, and other
customer-facing activities."5


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Department of Energy

The US Department of Energy is pursuing strategic partnerships to accelerate
investments in grid modernization, supporting groundbreaking research on synchrophasors, advanced grid modeling, and
energy storage – all key to a reliable, resilient, and long-lasting electricity

Personal Privacy Concerns

Any new form of data collection device or
system induces anxiety among personal privacy advocates, usually justified. Smart meters are no exception since by gathering data about individuals’electric use, utilities and other entities will be privy to customers’ personal
information. While privacy issues are unlikely to cause customers to
reject smart grid technology, smart grid providers may be compelled to launch
public relations campaigns to quiet any public unrest.

What Price Intelligence?

One of the principal concerns surrounding the smart grid movement is
security. Ironically, as the grid gets smarter, it also becomes more vulnerable,
as the technology itself provides an opportunity to "hack" the electrical system
in the same way that malicious actors attack the
nation’s e-commerce infrastructure.

To illustrate the danger, many security experts believe that the
Stuxnet worm, which was apparently designed to disrupt the industrial control
systems that regulated the operation of Iran’s nuclear enrichment facilities,
was developed and deployed by the US and Israeli governments. While perhaps
justified, this act of cyber warfare was nonetheless provocative.

As reported by analys Kennedy Maize, Pat Gelsinger, CEO of VMware, believes "The
biggest threat to security today is our hyper-focus on threats. Most innovations
have centered on finding and dealing with attacks. By contrast, very little has
been done in how we shrink the attack surface. That domain needs to be a topic
to achieve big gains in security.”

Gelsinger adds, “The most important security product won’t be a security
product in the future. It’s got to be built-in, not products outside the
system.” It will be necessary to “build more security systems into our
infrastructure, into the storage, into the network operations of our end-users,”
thus “simplifying – consistently reducing the attack surface.”6

In addition, smart grid developers and operators will be tasked with
protecting their infrastructure threats from electro-magnetic pulses (EMPs),
such as those produced when a nuclear device is detonated or the earth is
exposed to a severe solar-generated geomagnetic storm.

As analyst Jayshree Panfya observes, "As nations define and design smart
energy grids, it is vital to evaluate the security vulnerabilities and make the
grids resilient to both natural and artificial disasters." The first step is
determining who is in charge. In a query clearly aimed at national security
officials, Panfya asks pointedly, "Do you know who is responsible for power grid
security in your nation?"7 

The Russians Are Here

As a sign of the geopolitical times, on March 15, 2018, a US Technical Alert was issued
warning about "Russian Government Cyber Activity Targeting Energy and Other
Critical Infrastructure Sectors."

A result of analytic efforts between the Department of Homeland Security
(DHS) and the Federal Bureau of Investigation (FBI), this alert provides
information on Russian government actions targeting US Government entities as
well as organizations in the energy, nuclear, commercial facilities, water,
aviation, and critical manufacturing sectors. The DHS and FBI produced this
alert to "educate network defenders to enhance their ability to identify and
reduce exposure to malicious activity."

This alert clearly – and urgently – applies to the smart grid industry.

Smart Grid Index

Singapore’s SP Group has created a powerful new statistical instrument for smart grid management: the world’s first smart grid index (SGI) for utilities. 
According to analyst Sim Kwong Mian, the so-called "SGI framework
examines and uses seven key dimensions derived from
smart grid definitions, as defined by the European Commission and U.S.
Department of Energy." These dimensions are:

  1. "Monitoring and control
  2. "Data analytics
  3. "Supply reliability
  4. "[Distributed energy resources (DER)] integration
  5. "Green energy
  6. "Security
  7. "Customer empowerment and satisfaction.

"The data can be analyzed and applied in asset
planning and renewal, network operation and maintenance to improve overall
operational efficiency. Moreover, certain real-time data, such as energy
consumption and tariff information, can empower customers to make informed
decisions that lower energy costs.

"The SGI is a tool for policy makers, utilities and
other companies that want to drive smart grid development. Updated annually, the
SGI benchmarking results – with utility rankings and best practices – [serve] to
encourage utilities to innovate and invest in developing smarter grids."8


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Smart Grid Market

According to MarketsandMarkets, the smart grid market will grow from
$20.83 billion in 2017 to $50.65 billion by 2022, at a compound annual growth
rate (CAGR) of 19.4 percent.

Driving the market expansion are:

  • Government policies and legislative mandates.
  • Regional government initiatives for smart meter roll-outs.
  • Increasing demand for integration of renewable energy sources.
  • The need for improved grid reliability.
  • The need for efficient outage response.

From a technology perspective, expect the fastest growth rate in:

  • Smart grid communication software, which facilitates the formation of mesh
    networks. Mesh networks are instrumental in enabling intelligent features
    such as substation automation, distribution automation, energy management,
    real-time control, and self-healing.
  • Smart grid sensors, which improve power management at the
    transmission, distribution, and consumption levels, and play an important
    role in the integration of power from distributed resources.

A few of the key vendors serving the smart grid market are:

  • General Electric Company (New York, US)
  • ABB Ltd. (Zurich, Switzerland)
  • Siemens AG (Munich, Germany)
  • Schneider Electric SA (Rueil-Malmaison, France)
  • Cisco  Systems, Inc. (California, US)
  • IBM Corporation  (New York, US)
  • Oracle Corporation (California, US)9

Cutting Carbon

Perhaps their most significant virtue, smart grids can reduce the pace of
climate change.  According to the US Department of Energy, smart grids can
cut the electric power industry’s carbon emissions by a remarkable 25 percent.10

Drones:  A New Smart Grid Technology

While "drone" technology is widely used by the US government for military
purposes, drones can also serve civilian needs, such as smart grid aerial
surveillance. February 2013 test flights, directed by the Electric Power
Research Institute (EPRI), demonstrated that prototype drones, or unmanned
aerial systems (UAS) could be deployed to assess damage to electric transmission
and distribution systems following storms.

Asset Management

Increasingly, smart grid technology is being viewed as a vehicle for economic
survival. As analyst Casey Novak observes, "Margins are getting
tighter in the utility business. To thrive as a business, utilities now must be
able to closely monitor, control, and project (in real time) what’s happening
with energy markets, generation, grid performance, consumption and demand
patterns, and assets. Smart grid technology can provide a wealth of data, and
analytics for meter data management and more are becoming an essential business
and operations tool."11


Most regional power grids are hardwired to route
electricity from big power plants to homes and businesses. This method of
operation is not only energy inefficient but renders large geographic areas
vulnerable to single points of generation failure. As an alternative,
smart grid technology is enabling the development of "microgrids". According to the Sierra Club, "A microgrid [actually, a small local smart
empowers a geographic area to use its own electricity when it’s available and to
rely on the existing utility grid when it’s not. If the big grid flickers, the microgrid can hum along in "island mode" and keep critical functions running. As
we enter an era of superstorms, that could mean fewer blackouts. And if those
local energy sources are renewable, it means a smaller carbon footprint."

Among their principal virtues, "Microgrids could make the power system more efficient (by preserving the
up to 15 percent of electricity that can be lost on long-distance
transmission lines and local feeders) and less polluting (by reducing
reliance on carbon dioxide-spewing power plants)."12

Building and Testing the Smart Grid

The US Department of Energy reminds us, somewhat soberly but
also optimistically, that "The Smart Grid will consist of millions of pieces and
parts – controls, computers, power lines, and new technologies
and equipment. It will take some time for all the
technologies to be perfected, equipment installed, and
systems tested before it comes fully on line. And it won’t
happen all at once – the Smart Grid is evolving, piece by
piece, over the next decade or so. Once mature, the Smart
Grid will likely bring the same kind of transformation that
the Internet has already brought to the way we live, work,
play, and learn.

AI Is the Backbone

Analyst Sandra Ponce de Leon calls artificial intelligence (AI) "the
backbone of a true smart grid." Not surprisingly, "AI
will play the role of taking into account the millions of variables and
data points, including weather, demand, location, generation assets, etc
and proactively decide for every home where the power will come
from and how much it will cost. We don’t just need switches flipped
millions of times a second; we need decisions to be made. This is where
the power of AI comes in."

Josiah Nelson, Chairman and CEO of Trolysis, a renewable energy
company producing on-site, on-demand hydrogen power from aluminum and

"We’re baking in AI in nearly all
of our products. On a small scale, it helps route the aluminum fuel
between stacks in a system and adjusts based on environmental
factors to ensure constant flow of hydrogen, but as you scale up and
have 100 systems on a single site, we leverage AI to coordinate
between systems and ensure the total demanded output is balanced
effectively between each system and if there’s some sort of fault,
it can instantly be balanced between stacks within the individual
system or other systems on the site, meaning even if 25 percent of the
systems failed all at once, the remaining stacks will increase their
output to offset and the customer would never feel it.

"The simple fact is that AI adds huge value from both resiliency and
cost-savings standpoints.

We’ve seen
tremendous results from AI implementation in our technology, so one can
only imagine the impact it will have at grid-scale."14


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Increase International Coordination

The US is not alone in its efforts to modernize the electric
grid. Among the countries that have or
will begin investing in substantial Smart Grid infrastructure are:

  • Canada
  • Mexico
  • Brazil
  • the European Union (EU) including many member states
  • Japan
  • South Korea
  • Australia
  • India
  • China

Promote Private Sector Involvement

Enterprise planners and security officials should
monitor the smart grid movement, ensuring that all companies have:

  1. An opportunity to contribute to smart grid design and development
    (monopolies are not conducive to best technologies and best practices).
  2. A voice relative to smart grid security and personal privacy

Align Smart Grid Initiatives with Quadrennial Energy Review

Finally, from an official Washington perspective, in April 2015, the
US Department of Energy released the "Quadrennial Energy Review," recommending the
following actions aimed at "Modernizing the Electric Grid:"

  1. Provide grid modernization research and
    development, analysis, and institutional support.
    The Department of
    Energy (DOE) should continue to pursue a multi-year, collaborative, and
    cost-shared research and development, analysis, and technical assistance
    program for technology innovation that supports grid operations, security,
    and management, as well as for analyses, workshops, and dialogues to
    highlight key opportunities and challenges for new technology to transform
    the grid.

  2. Establish a framework and strategy for
    storage and grid flexibility.
    DOE should conduct regional and state
    analyses of storage deployment to produce a common framework for the
    evaluation of benefits of storage and grid flexibility, and a strategy for
    enabling grid flexibility and storage that can be understood and implemented
    by a wide range of stakeholders.

  3. Conduct a national review of transmission
    plans and assess barriers to their implementation.
    DOE should carry
    out a detailed and comprehensive national review of transmission plans,
    including assessments on the types of transmission projects proposed and
    implemented, current and future costs, consideration of interregional
    coordination, and other factors. A critical part of this review should be to
    assess incentives and impediments to the development of new transmission.

  4. Provide state financial assistance to promote
    and integrate transmission, storage, and distribution infrastructure
    investment plans for electricity reliability, affordability, efficiency,
    lower carbon generation, and environmental protection.
    In making
    awards under this program, DOE should require cooperation within the
    planning process of energy offices, public utility commissions, and
    environmental regulators within each state; with their counterparts in other
    states; and with infrastructure owners and operators and other entities
    responsible for maintaining the reliability of the bulk power system.

  5. Coordinate goals across jurisdictions.
    DOE should play a convening role to bring together public utility
    commissioners, legislators, and other stakeholders at the Federal, state,
    and tribal levels to explore approaches to integrate markets, while
    respecting jurisdictional lines, but allowing for the coordination of goals
    across those lines.

  6. Value new services and technologies. DOE
    should play a role in developing frameworks to value grid services and
    approaches to incorporate value into grid operations and planning. It should
    convene stakeholders to define the characteristics of a reliable,
    affordable, and environmentally sustainable electricity system and create
    approaches for developing pricing mechanisms for those characteristics. The
    goal should be to develop frameworks that could be used by the Federal
    Energy Regulatory Commission, state public utility commissions in ratemaking
    proceedings, Regional Transmission Organizations in their market rule
    development, or utilities in the operation and planning of their systems.

  7. Improve grid communication through standards
    and interoperability.
    In conjunction with the National Institute of
    Standards and Technology and other Federal agencies, DOE should work with
    industry, the Institute of Electrical and Electronics Engineers, state
    officials, and other interested parties to identify additional efforts the
    Federal Government can take to better promote open standards that enhance
    connectivity and interoperability on the electric grid.

  8. Establish uniform methods for monitoring and verifying energy
    Through its Uniform Methods Project, DOE should accelerate
    the development of uniform methods for measuring energy savings and promote
    widespread adoption of these methods in public and private efficiency

In January 2017, a second installment of the Quadrennial Energy Review was
released. This version tackles cybersecurity and highlights the digital threats
that smart grid developers and operators must mitigate.

According to the authors, attack objectives can range from intelligence
gathering to intentional destruction of grid integrity and operations
capability. Figure 2 summarizes these challenges.16

Figure 2. Summary of the Cybersecurity Characteristics and Risks Confronting Smart Grid Deployment

Figure 2. Summary of the Cybersecurity Characteristics and Risks Confronting Smart Grid Deployment

Cyber threats have different
objectives: typically, incursions by sovereign attackers are warfare-oriented
whereas incursions by groups and individuals are driven by pecuniary interests,
such as corporate espionage, credit card fraud, and ransom. Sovereign and
non-sovereign hacking exhibit similar characteristics and patterns, which inform
efforts to defend against attacks.


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1 Nick Davis. "The Smart Grid: What’s ‘the grid’ and how is it
‘smart’?" Aspencore, Inc. May 23, 2017.

2 "Smart Grid 101: The Forces in Favor of a
Smart Grid." Smart Grid News. January 19, 2010.

3 "A Smart Grid: What is a Smart Grid?" GridWise Alliance.

4 "Smart Grid 101: The Smart Grid."
Smart Grid News. January 20, 2010.

5 Ibid.

6 Kennedy Maize. "The Dark Side of the Smart
Grid." Access Intelligence, LLC. 2020.

Jayshree Panfya. "The Evolving Energy Ecosystem: Smart Grids To Smart
Energy." Forbes Media LLC. April 4, 2019.

8 Sim Kwong Mian. "A Look at the World’s First Smart Grid Index." T&DWorld.
December 4, 2019.

"Smart Grid Market by Software (AMI, Smart Grid Distribution Management, Smart
Grid Communication, Grid Asset Management, Substation Automation, and Billing
and Customer Information System), Hardware, Service, and Region – Global
Forecast to 2022." MarketsandMarkets. July 2017.

10 "What to know about a smart grid." Clarion Energy. October 8, 2019.

11 Casey Novak. "How Smart Grid Technology Can Build a Better Utility Industry Future: Part 1."
Social Media Today. January 20, 2014.

12 "INNOVATE | The Power of
Microgrids." Sierra (magazine). July/August 2013.

"The Smart Grid." | Office of Electricity
Delivery & Energy Reliability | US Department of Energy.

Sandra Ponce de Leon. "The Role Of Smart Grids And AI In The Race To
Zero Emissions." Forbes Media LLC. March 20, 2019. 

15 "QER Report: Energy Transmission, Storage, and Distribution
Infrastructure." US Department of Energy. April 2015:3-25.

16 “Transforming the Nation’s Electricity System: The Second
Installment of the QER." US Department of Energy. January 2017:1-34.

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About the Author

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James G. Barr is a leading business continuity analyst and business
writer with more than 30 years’ IT experience. A member of "Who’s
Who in Finance and Industry," Mr. Barr has designed, developed, and
deployed business continuity plans for a number of Fortune 500 firms. He
is the author of several books, including How to Succeed in Business BY
Really Trying
, a member of Faulkner’s Advisory Panel, and a senior editor
for Faulkner’s Security Management Practices. Mr. Barr can be
reached via email at

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